Half Year Review to 31 December 2020

22 February 2021



The Manager
ASX Market Announcements
Australian Securities Exchange
Exchange Centre
Level 4
20 Bridge Street
Sydney NSW 2000


Electronic Lodgement


Australian Foundation Investment Company Limited
Half Year Review to 31 December 2020


Dear Sir / Madam

Please find attached the Half Year Review to 31 December 2020 that is being sent to
shareholders.


Yours faithfully

Matthew Rowe
Company Secretary


Release authorised by Matthew Rowe, Company Secretary

Half-Year Review
to 31 December
20
20

1 Half-Year in Summary
2 About the Company
4 Review of Operations
and Activities
12 Top 25 Investments
13 Income Statement
14 Balance Sheet
15 Summarised Statement
of Changes in Equity
16 Holdings of Securities
19 Major Transactions in
the Investment Portfolio
20 Company Particulars
21 Shareholder Information
Contents
AUSTRALIAN FOUNDATION
INVESTMENT COMPANY
IS A LISTED INVESTMENT
COMPANY INVESTING
IN AUSTRALIAN AND
NEW ZEALAND EQUITIES.
Australian Foundation Investment Company Limited ABN 56 004 147 120

Half-Year in Summary
Profit for
the Half-Year
$84.1m
Down 42.4%
from 2019
6 Month
Total Portfolio
Return
15.2%
Including franking*
S&P/ASX 200
Accumulation
Index including
franking* 13.7%
Fully Franked
Interim
Dividend
10
¢
10 cents
in 2019
* Assumes an investor can take full advantage of the franking credits.
2020
Management
Expense Ratio
(Annualised)
0.10%
0.10%
in 2019
Total
Portfolio
$8.1b
Including cash
at 31 December
$8.0 billion in 2019
6 Month Total
Shareholder
Return
22.5%
Share price plus
dividend
1Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

About the Company
How AFIC Invests – What We Look For in Companies
Australian Foundation Investment Company (AFIC)
is a listed investment company investing in Australian
and New Zealand equities.
Investment Objectives
The Company aims to provide
shareholders with attractive investment
returns through access to a growing
stream of fully franked dividends and
growth in capital invested.
The Company’s primary investment
goals are:
• to pay dividends which, over time, grow
faster than the rate of inflation; and
• to provide attractive total returns over
the medium to long term.
2Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020
A portfolio that
is managed to
achieve long term
capital and dividend
growth
Quality FirstGrowth
Including dividends
Value

Approach to Investing
The investment philosophy is built
on taking a medium to long term view on
companies in a diversified portfolio with an
emphasis on identifying quality companies
that are likely to sustainably grow their
earnings and dividends over this timeframe.
Quality in this context is an outcome of our
assessment of the board and management
as well as some key financial metrics. These
include return on capital employed, return on
equity, the level of gearing in the balance sheet,
margins and free cash flow. The structure of
the industry and a company’s competitive
position in this industry is also an important
indicator of quality. Linked to this assessment
of quality is the ability of companies to grow
earnings over time, which ultimately should
produce good dividend growth.
As a long term investor, Environmental, Social
and Governance (ESG) analysis is integrated
into AFIC’s investment framework:
• AFIC will seek to invest in companies
that have strong governance and risk
management processes that include
environmental and social risks.
• The remuneration structures proposed
and used by the Boards of the companies
in which AFIC invests are assessed
as we are seeking remuneration plans
and outcomes that align with AFIC’s
(and AFIC’s own investors) interests
as long term shareholders.
• AFIC supports engagement with its investee
companies on these issues, and will vote
as shareholders accordingly.
Recognising value is also an important
aspect of sound long term investing. Short
term measures such as the price earnings
ratio, price to book or price to sales may
be of some value, but aren’t necessarily
strong predictors of future performance.
Our assessment of value tries to capture
the opportunity a business has to prosper
and thrive over the medium to long term.
In building the investment portfolio in this
way, we believe we can offer investors a well-
diversified portfolio of high-quality companies
that is intended to deliver total returns ahead
of the Australian equity market and with less
volatility over the long term.
The Company also uses options written
against a small proportion of its investments
and a small trading portfolio to generate
additional income.
From time to time, some borrowings may
be used where potential investment returns
justify the use of debt. This is managed
within very conservative limits, as determined
by the Board.
AFIC is managed for the benefit of its
shareholders with fees based on the
recovery of costs rather than as a fixed
percentage of the portfolio. There are no
performance fees. As a result, the benefit
of scale over time results in a very low
expense ratio for investors. For the six
months to 31 December 2020, this was
0.10 per cent (annualised), or 10 cents
for each $100 invested.
3Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Profit and Dividend
Half-year profit was $84.1 million, down from
$146.1 million in the corresponding period
last year.
Difficult operating conditions arising from the
COVID-19 pandemic meant investment income
for the six months to 31 December 2020 was
$95.2 million, down from $164.1 million in the
corresponding period last year. The biggest
reductions came from the major banks, BHP,
Macquarie Group and Transurban, while a
number of companies in the portfolio did
not pay a dividend during the half.
Despite the fall in the half-year earnings per
share to 6.9 cents, the interim dividend for the
half-year is 10 cents per share, fully franked,
the same as the previous corresponding
period. Part of the interim dividend this
year has been funded from reserves.
The management expense ratio for AFIC
is 0.10 per cent (annualised), with no
performance fees.
Portfolio Returns and Positioning
The Australian equity market was pushed
higher in the first half of the financial year
(Figure 1) as global markets rallied on the
back of very low interest rates, significant
government stimulus and increased
confidence about effective vaccines for
the COVID-19 pandemic. This is despite
the negative impact the pandemic is having
on corporate earnings and renewed outbreaks
of the virus in key global economies.
The increase in the Australian market has
been driven by the information technology
sector (Figure 2), driven largely by the ongoing
momentum of Afterpay (which AFIC does
not hold), and the performance of Xero and
NEXTDC, and the materials sector (with BHP
and Rio Tinto very strong on the back of a
very high iron ore price). Industrials and banks
underperformed over the 12-month period.
However, banks have been strong over the six
months to 31 December 2020, as economic
conditions improved and there appeared to
be a better outlook for a reduced level of bad
debts arising from deferred loans in housing.
Through this period, AFIC has continued to
focus the portfolio on quality businesses with
a competitive advantage, strong returns on
invested capital and resilient balance sheets.
This has delivered a satisfactory portfolio
performance despite not being in some of the
more cyclical sectors of the market which have
rebounded more recently as investors look for
value in previously underperforming sectors,
such as travel.
AFIC’s portfolio was up 15.2 per cent for the
six months to 31 December 2020 compared
with the S&P/ASX 200 Accumulation Index,
which was up 13.7 per cent over the same
period. These figures include the benefit of
franking credits, with AFIC’s performance
numbers after costs.
Companies in the portfolio that contributed
strongly to returns through the six-month
period were Commonwealth Bank, BHP,
Mainfreight, Xero, Wesfarmers, James Hardie
Industries, ARB Corporation and Reece.
For the 12 months to 31 December 2020,
the portfolio return, including franking, was
5.8 per cent. The return from the S&P/ASX
200 Accumulation Index over this period,
including franking, was 2.4 per cent
(Figure 3 on page 6).
Review of Operations and Activities
4Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

7,200
6,800
6,400
6,000
5,600
5,200
4,800
4,400
Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20
Jul 20
Aug 20
Sep 20
Oct 20
Nov 20
Dec 20
Figure 1: S&P/ASX 200 Index – 12 Months to 31 December 2020
180
160
140
120
100
80
60
S&P/ASX 200 Industrials
S&P/ASX 200 Banks
S&P/ASX 200 Information Technology
S&P/ASX 200 Resources
Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20
Jul 20
Aug 20
Sep 20
Oct 20
Nov 20
Dec 20
Figure 2: Selected Sectors Total Return – 12 Months to 31 December 2020
Source FactSet
Source FactSet
5Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Portfolio Adjustments
Portfolio turnover was lower during the
past six months than in previous periods.
Repositioning of the portfolio in prior years
has produced an increased weighting toward
our preferred companies with little need for
extensive adjustments. At 31 December 2020,
there were 61 companies in the portfolio.
Having taken advantage of the large market
falls in March and April 2020 to participate
in selected capital raisings, further volatility
during the past six months has provided
opportunities to add to holdings in Woolworths,
CSL and ASX. The purchase of Sydney Airport
stock was through the participation in their
entitlement issue. Two new companies were
also added: Fineos, a software business
for insurance, and Nanosonics, a medical
device company.
Major sales included the complete disposal
of South32, reduction of the holding in Alumina
and a trimming of the holdings in Oil Search
and Cleanaway Waste Management. Other
sales included a reduction in James Hardie
Industries, as the share price ran up very
strongly through the period, and National
Australia Bank, as the share price made strong
gains following its capital raising in May 2020.
Figure 4 highlights the profile of AFIC’s
portfolio by the various sectors of the market
at the end of the calendar year and how
it differs from the Index.
Review of Operations and Activities
continued
1 year return5 year return10 year return
5.8%
9.8%
9.5%
9.4%
10.2%
2.4%
6 month return
15.2%
13.7%
Net asset per share growth plus
dividends, including franking
S&P/ASX 200 Accumulation
Index including franking
Figure 3: Portfolio Performance (Including the Full Benefit of Franking)
− to 31 December 2020
Per annum returns other than for six months. AFIC’s performance numbers are after costs.
6Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

AFIC portfolio weightS&P/ASX 200 Index weight
17.5%16.9%15.4%15.0%8.5%6.4%0.8%4.8%2.4%4.7%1.3%2.0%4.3%
20%
15%
10%
5%
0%
Banks
Healthcare
Industrials
Materials
Energy
Real
Estate
Cash
Utilities
Other
Financials
Consumer
Discretionary
Consumer
Staples
Communication
Services
Information
Technology
Figure 4: AFIC Investment by Sector Versus the S&P/ASX 200 Index
as at 31 December 2020
Source: FactSet
7Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Review of Operations and Activities
continued
Share Price and Returns
Figure 5 highlights where AFIC’s share price
was trading relative to the net asset backing
at 31 December 2020. Over the six-month
period the share price has moved from a
2 per cent premium at 30 June 2020 to
a premium of 10 per cent to net asset
backing by 31 December 2020.
This change in the premium is reflected in
the recent strong share price return relative
to the S&P/ASX 200 Accumulation Index for
the six-month period to 31 December 2020
(Figure 6). Importantly, the long term 10-year
return is 8.4 per cent for the share price in
comparison to 7.8 per cent for the Index.
The figures for the Index and share price
do not include any benefit a shareholder
can derive from the franking credits
attached to the dividends paid.
International Portfolio
At the AGM held in October 2020, we
highlighted that AFIC was considering
investing a small part of its funds (1.5 per cent)
in a diversified global equities portfolio of
high-quality listed companies. As highlighted
at the time, we believe it will add to the growth
prospects and diversification of our existing
Australian-based portfolio. We are expecting
funds to be invested in the coming months.
In the future, when the performance of this
portfolio has been assessed, we will consider
whether it represents an opportunity for our
shareholders and other investors to invest
in this global portfolio directly.
8Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

15%
-10%
-5%
0%
5%
10%
Dec 10
Dec
11
Dec
12
Dec
13
Dec
15
Dec
14
Dec
16
Dec
17
Dec
18
Dec 19Dec 20
Figure 5: Share Price Relative to Net Asset Backing Per Share
Figure 6: Share Price Return − to 31 December 2020
Source: FactSet
Per annum returns other than for six months.
1 year return5 year return10 year return
6.6%
8.7%
8.4%
7.8%
8.7%
1.4%
6 month return
22.5%
13.2%
Share price growth plus dividendsS&P/ASX 200 Accumulation Index
9Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Review of Operations and Activities
continued
Outlook
The immediate course of the pandemic
remains uncertain as does the outlook
for corporate earnings and dividends.
The longevity and effectiveness of monetary
policy and fiscal stimulus appear to remain
key to underlying economic conditions, as
does the potential effectiveness of COVID-19
vaccines moving into the new calendar year.
In addition, the change in administration in the
United States and the nature of geopolitical
relationships with China across the globe may
further impact international equity markets.
While equity markets are continuing to be
heavily influenced by low interest rates, and
with valuations for many companies at a high
point (Figure 7), any negative sentiment could
produce significant volatility. We believe the
portfolio is well positioned for the long term
should this occur. AFIC has sufficient funds
available should good buying opportunities
arise in the second half of the financial year
during any market weakness.
20
19
18
17
16
15
14
13
12
11
10
9
8
Times
Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
Jan 14
Jul 14
Jan 15
Jul 15
Jan 16
Jul 16
Jan 17
Jul 17
Jan 18
Jul 18
Jan 19
Jul 19
Jan 20
Jul 20
Average
14.9
Figure 7: S&P/ASX 200 Price Earnings Ratio
Source: FactSet
10Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

11Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Includes investments held in both the investment and trading portfolios.
Value at Closing Prices at 31 December 2020
Total Value
$ Million
% of the
Portfolio
1Commonwealth Bank of Australia 648.78.1
2CSL 615.77.7
3BHP Group*590.67.4
4Wesfarmers 371.54.7
5Transurban Group 322.94.1
6Westpac Banking Corporation301.13.8
7Macquarie Group 300.43.8
8National Australia Bank* 271.53.4
9Woolworths Group 249.23.1
10Rio Tinto* 227.32.9
11Mainfreight 211.92.7
12Australia and New Zealand Banking Group 192.72.4
13Amcor 177.92.2
14James Hardie Industries* 175.42.2
15Sydney Airport* 163.92.1
16Telstra Corporation 162.42.0
17Brambles 128.71.6
18Coles Group 128.21.6
19Xero 127.81.6
20Goodman Group 126.41.6
21Sonic Healthcare 119.11.5
22Ramsay Health Care119.11.5
23Seek 118.71.5
24Reece 117.71.5
25ResMed 110.31.4
Total6,079.1
As percentage of total portfolio value (excludes cash)76.3%
* Indicates that options were outstanding against part of the holding.
Top 25 Investments
As at 31 December 2020
12Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Half-Year
2020
$’000
Half-Year
2019
$’000
Dividends and distributions93,837153,929
Revenue from deposits and bank bills951,109
Net gains/(losses) on trading portfolio (1,009)6,628
Other revenue-21
Total income92,923161,687
Finance costs(1,122)(462)
Administration expenses(3,680)(3,874)
Profit before income tax 88,121157,351
Income tax (3,987)(11,250)
Profit for the half-year 84,134146,101
CentsCents
Earnings per share6.8912.10
Income Statement
For the Half-Year Ended 31 December 2020
13Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

31 Dec
2020
$’000
30 June
2020
$’000
Current assets
Cash 103,222111,318
Receivables6,54517,347
Trading portfolio2,1574,304
Tax refund due3,802-
Total current assets115,726132,969
Non-current assets
Investment portfolio 7,969,1577,117,970
Deferred tax assets4,119872
Total non-current assets7,973,2767,118,842
Total assets8,089,0027,251,811
Current liabilities
Payables1,427884
Tax payable-30,771
Provisions3,4024,765
Total current liabilities4,82936,420
Non-current liabilities
Provisions6671,375
Deferred tax liabilities – investment portfolio1,253,986973,499
Total non-current liabilities1,254,653974,874
Total liabilities1,259,4821,011,294
Net assets6,829,5206,240,517
Shareholders’ equity
Share capital2,982,3782,947,293
Revaluation reserve2,795,7492,166,030
Realised capital gains reserve343,563397,712
General reserve23,63723,637
Retained profits684,193705,845
Total shareholders’ equity (including minority interests)6,829,5206,240,517
Balance Sheet
As at 31 December 2020
14Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Half-Year
2020
$’000
Half-Year
2019
$’000
Total equity at the beginning of the half-year6,240,5176,624,746
Dividends paid(164,556)(164,150)
Dividend Reinvestment Plan35,16534,407
Other share capital adjustments(80)(76)
Total transactions with shareholders(129,471)(129,819)
Profit for the half-year84,134146,101
Revaluation of investment portfolio908,353219,411
Provision for tax on revaluation(274,013)(68,366)
Revaluation of investment portfolio (after tax)634,340151,045
Total comprehensive income for the half-year718,474297,146
Realised gains/(losses) on securities sold(1,854)16,857
Tax on realised gains/(losses) on securities sold6,475(22,045)
Net realised gains/(losses) on securities sold4,621(5,188)
Transfer from revaluation reserve to realised gains reserve(4,621)5,188
Total equity at the end of the half-year6,829,5206,792,073
A full set of AFIC’s interim accounts are available on the Company’s website.
Summarised Statement of Changes in Equity
For the Half-Year Ended 31 December 2020
15Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Individual investments for the combined investment and trading portfolios as at 31 December
2020 are listed below. The list should not, however, be used to evaluate portfolio performance or
to determine the net asset backing per share at other dates. Net asset backing is advised to the
Australian Securities Exchange each month and is recorded on the toll free telephone service
at 1800 780 784 and posted to AFIC’s website afi.com.au.
Individual holdings in the portfolios may change during the course of the year. In addition, holdings
which are part of the trading portfolio may be subject to call options or sale commitments by which
they may be sold at a price significantly different from the market price prevailing at the time of the
exercise or sale.
Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
AIAAuckland International Airport6,07343,546
ALQALS7,01267,387
ALUAltium39613,443
AMCAmcor11,600177,945
ANNAnsell1,07937,523
ANZAustralia and New Zealand Banking Group8,488192,671
APAAPA Group6,66564,317
ARBARB Corporation3,503107,884
ASXASX1,24389,462
AUBAUB Group2,52640,893
AWCAlumina6,41311,768
BHP*BHP Group13,935590,570
BKWBrickworks1,36926,277
BXBBrambles12,139128,670
CARCarsales.com5,033100,711
CBACommonwealth Bank of Australia7,900648,669
COHCochlear33463,072
Holdings of Securities
As at 31 December 2020
16Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
COLColes Group7,068128,204
CPUComputershare4,38063,904
CSLCSL2,174615,722
CWYCleanaway Waste Management17,01439,983
DJWDjerriwarrh Investments7,50523,267
DUIDiversified United Investment12,03057,865
EQTEQT Holdings 1,32234,996
FCLFineos Corporation4,70717,417
FPHFisher & Paykel Healthcare Corporation3,485107,861
GMGGoodman Group6,685126,413
IAG*Insurance Australia Group9,52744,670
IREIRESS6,59169,933
IVCInvoCare3,51240,217
JHX*James Hardie Industries4,590175,424
LICLifestyle Communities2,77635,510
MFTMainfreight (NZX listed)3,268211,916
MIRMirrabooka Investments8,72828,365
M LTMilton Corporation9,77646,631
MQGMacquarie Group2,170300,437
NAB*National Australia Bank12,055271,525
NANNanosonics3,01124,175
NWLNetwealth Group1,44523,033
NXTNEXTDC7,86496,183
ORGOrigin Energy6,50030,940
ORIOrica2,22633,720
17Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Holdings of Securities
As at 31 December 2020 continued
Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
OSHOil Search19,18571,177
QUBQube Holdings35,302103,788
REAREA Group55382,291
REHReece7,951117,679
RHCRamsay Health Care1,915119,075
RIO*Rio Tinto2,001227,302
RMDResMed4,050110,282
RWCReliance Worldwide Corporation11,46346,426
RYMRyman Healthcare (NZX listed)88012,470
SEKSeek4,160118,674
SHLSonic Healthcare3,704119,090
SYD*Sydney Airport25,606163,922
TCLTransurban Group23,637322,878
TLSTelstra Corporation54,510162,440
WBCWestpac Banking Corporation15,545301,107
WESWesfarmers7,372371,549
WOWWoolworths Group6,339249,175
WPL*Woodside Petroleum4,02091,058
XROXero871127,807
Total7,971,314
* Indicates that options were outstanding against part of the holding.
18Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Acquisitions
Cost
($’000)
Woolworths Group 25,158
Fineos Corporation20,998
Sydney Airport (1 for 5. 15 entitlement offer)18,986
Nanosonics18,518
CSL 15,071
ASX14,808
Disposals
Proceeds
($’000)
South32
#
35,848
Alumina22,869
Oil Search21,471
James Hardie Industries18,949
Cleanaway Waste Management17,961
National Australia Bank 15,456
# Complete disposal from the portfolio.
New Companies Added to the Investment Portfolio
Fineos Corporation
Nanosonics
Major Transactions in the Investment Portfolio
19Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Australian Foundation Investment
Company Limited (AFIC)
ABN 56 004 147 120
AFIC is a listed investment company.
As such it is an investor in equities and
similar securities on the stock market
primarily in Australia.
Directors
John Paterson, Chairman
Robert M Freeman, Managing Director
Ross E Barker
Rebecca P Dee-Bradbury
Graeme R Liebelt
David A Peever
Catherine M Walter AM
Peter J Williams
Company Secretaries
Matthew J Rowe
Andrew JB Porter
Auditor
PricewaterhouseCoopers
Chartered Accountants
Country of Incorporation
Australia
Registered Office and Mailing Address
Level 21, 101 Collins Street
Melbourne Victoria 3000
Contact Details
Telephone (03) 9650 9911
Facsimile (03) 9650 9100
Website afi.com.au
Email invest@afi.com.au
For enquiries regarding net asset backing
(as advised each month to the Australian
Securities Exchange)
Telephone 1800 780 784 (toll free)
Company Particulars
20Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

Securities Registrar
Computershare Investor Services Limited
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
AFIC Shareholder
Enquiry Lines 1300 662 270 (Australia)
0800 333 501 (New Zealand)
+61 3 9415 4373
(from overseas)
Facsimile (03) 9473 2500
Website investorcentre.com.au/contact
Share Registrar
For all enquiries relating to shareholdings,
dividends and related matters, please contact
the share registrar in your country.
Securities Exchange Codes
AFI Ordinary shares (ASX and NZX)
Shareholder Meeting
Note the shareholder meetings which are usually
held in March in various capital cities have been
replaced by a webinar/telephone briefing to be
held on 16 March 2021 at 10.00am.
Registration details for the webinar and dial-in
phone number for teleconference participants
have been provided in a separate invitation
letter/email to shareholders.
Shareholder Information
21Australian Foundation Investment Company LimitedHalf-Year Review to 31 December 2020

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